SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE February 21, 1996 1:37 p.m. MEMBERS PRESENT Senator John Torgerson, Chairman Senator Randy Phillips, Vice Chairman Senator Tim Kelly Senator Fred Zharoff Senator Lyman Hoffman MEMBERS ABSENT All members present COMMITTEE CALENDAR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 20 "An Act establishing the Alaska municipal basic services program, relating to certain programs of state aid to municipalities and recipients in the unorganized borough; and providing for an effective date." SENATE BILL NO. 207 "An Act authorizing the issuance and sale of revenue bonds to fund public wastewater systems, nonpoint source water pollution control projects, including solid waste management systems, and estuary conservation and management projects; authorizing the use of the Alaska clean water fund to pay and secure the bonds and to pay costs related to issuance and administration of the bonds; authorizing certain measures to secure payment of the bonds; and amending Alaska Rule of Civil Procedure 3." SENATE BILL NO. 229 "An Act relating to employment contributions and to making the state training and employment program a permanent state program; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 20 - See Community & Regional Affairs minutes dated 2/22/95, 2/7/96, 2/14/96. SB 207 - See Community & Regional Affairs minutes dated 2/5/96, 2/14/96. SB 229 - See Community & Regional Affairs minutes dated 2/7/96, 2/12/96. WITNESS REGISTER Bill Rolfzen Division of Municipal Assistance Department of Community & Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 POSITION STATEMENT: Offered information on CSSSSB 20(CRA) Lamar Cotten, Deputy Commissioner Department of Community & Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 POSITION STATEMENT: Testified in support of CSSSSB 20(CRA), with exception of one provision Kevin Ritchie, Executive Director Alaska Municipal League 217 2nd St. Juneau, AK 99801 POSITION STATEMENT: Testified in support of CSSSSB 20(CRA) Marie Sansone, Assistant Attorney General Civil Division Department of Law P.O. Box 110300 Juneau, AK 99811-0300 POSITION STATEMENT: Offered information on proposed amendments to SB 207 Rebecca Nance, Director Division of Employment Security Department of Labor P.O. Box 25509 Juneau, AK 99802-5509 POSITION STATEMENT: Offered information on SB 229 Mark Mickelson Division of Community & Rural Development Department of Community & Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 POSITION STATEMENT: Offered information on SB 229 Chris Miller, Chief Research Analysis Section Department of Labor P.O. Box 25509 Juneau, AK 99802-5509 POSITION STATEMENT: Offered information on SB 229 ACTION NARRATIVE TAPE 96-10, SIDE A Number 001 CHAIRMAN TORGERSON called the Senate Community & Regional Affairs Committee meeting to order at 1:37 p.m. SSSB 20 ALASKA MUNICIPAL BASIC SERVICES PROGRAM  SENATOR TORGERSON brought CSSSSB 20(CRA), which was adopted by the committee on 2/7/96, before the committee as the first order of business, and directed attention to a proposed amendment as well as a new fiscal note from the Department of Revenue. He then asked Bill Rolfzen of the Department of Community & Regional Affairs to explain the department's amendment. Number 030 BILL ROLFZEN , Division of Municipal & Regional Assistance, Department of Community & Regional Affairs, explained that when a new borough incorporates under the existing Municipal Assistance Program, its base amount assessment is set at the same amount as a borough that is closest in population. The amendment would eliminate one borough as far as determining base amounts. He referred to a spreadsheet which lists 13 boroughs. For 12 of the boroughs, the average base amount is approximately $94,000, and the remaining borough's base amount is $1.2 million. By excluding that one borough, it will be a much more equitable determination of base amount for future boroughs. Number 055 SENATOR RANDY PHILLIPS moved the adoption of the following amendment to CSSSSB 20(CRA): Amendment No. 1 Page 5, line 27: After "incorporation" insert ",excluding each borough with a per capita full and true property value exceeding $500,000" Hearing no objection, the Chairman stated the motion carried. Number 065 LAMAR COTTEN , Deputy Commissioner, Department of Community & Regional Affairs, voiced the department's support for of the intent and language of the bill, with the exception of one the bill's provisions which changes the date that checks are received from February 1 to July 31. In response to an inquiry from Senator Torgerson, he stated the department, as part of the Administration, supports the 8 percent cut recommended by the Governor. KEVIN RITCHIE , Executive Director, Alaska Municipal League, commenting on the Administration's position on the fiscal note, said the bill itself has an internal equity to it, and that is a very important part of it. He added the question of the funding is a whole separate issue and, certainly, the Legislature doesn't have to take the recommendation of the 8 percent cut as the one it goes with. Number 103 SENATOR ZHAROFF asked for assurance there would be no problem with Metlakatla's allocation. BILL ROLFZEN responded Metlakatla currently participates in revenue sharing as an unincorporated community, and under municipal assistance, as a municipality, this bill does not change that. Number 125 SENATOR RANDY PHILLIPS moved CSSSSB 20(CRA), as amended and with the accompanying fiscal note, be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. SB 207 REVENUE BONDS: WATER & WASTE PROJECTS Number 130 SENATOR TORGERSON brought SB 207 before the committee as the next order of business. He directed attention to four proposed amendments for the committee's consideration. SENATOR RANDY PHILLIPS moved adoption of the following Amendment No. 1: Amendment No. 1 Page 6, line 6: After "in" insert "the current fiscal year and" Page 8, line 12: After "letters" insert "and lines" Number 160 MARIE SANSONE , Assistant Attorney General, Civil Division, Department of Law, said she worked closely with the Department of Environmental Conservation and the Department of Revenue in preparing SB 207. The amendment was proposed by the Department of Revenue to add the term "the current fiscal year" which was inadvertently omitted when the statute was being drafted. SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 1, and hearing none, he stated it was adopted. Number 175 SENATOR RANDY PHILLIPS moved adoption of the following Amendment No. 2: Amendment No. 2 Page 2, line 7: After "authorized" insert ",subject to (b) of this section" Page 2, line 13: Insert a new subsection to read: "(b) The state bond committee may not issue more than $15,000,000 in revenue bonds during a fiscal year, excluding refunding bonds. The total amount of revenue bonds outstanding at any one time may not exceed $150,000,000, including principal and interest owed on the bonds." SENATOR TORGERSON explained the amendment puts a cap on the revenue bonds by setting out that there can be no more than $15,000,000 in revenue bonds sold in one year, and it cannot exceed $150,000,000 for the total program. MARIE SANSONE stated the Administration's support for the language. SENATOR ZHAROFF said he has no problem with setting a cap, but his concern is having some kind of safety mechanism for the small community that may have the ability to take advantage of the program, but could be excluded because they are bumping up against the cap. SENATOR TORGERSON said an attempt was made to draft some language to address his concern, but there were problems with its interpretation. MARIE SANSONE pointed out the intent language in Section 1 of the bill does recognize that the financing of needed water quality improvements is the purpose of this legislation. Also, there is another provision which requires the state bond committee to consider that in all its decisions. SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 2. Hearing none, he stated Amendment No. 2 was adopted. Number 235 SENATOR KELLY moved adoption of the following Amendment No. 3: Amendment No. 3 Page 7, line 19 - 21: Delete all material. Page 8, lines 27 - 28: Delete "The provisions of this section shall be liberally construed in order to carry out the purposes for which they were enacted." MARIE SANSONE said the term "liberal construction," when talking about statutes, is a very standard phrase. It is a term that is recognized by the State Supreme Court. Because this is a remedial statute that is designed to achieve the public purpose of promoting public health and welfare, the statute will have a liberal construction if that ever became an issue. She said it does serve a purpose to leave this provision in the statute, but she suggested if the committee wants to change it, the term "broadly construed" could be used in its place. SENATOR KELLY voiced his concern that if, in fact, it does goes to court he doesn't want them to "liberally construe" that language, and he doesn't want to give the court that option. SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 3, and hearing none, he stated it was adopted. Number 305 SENATOR HOFFMAN moved adoption of the following Amendment No. 4: Amendment No. 4 Page 2, line 5: Delete "state agencies" and insert "other qualified entities" Page 9, line 18: Delete "state agencies" and insert "other qualified entities" Page 9, line 20: Delete "state agencies" and insert "other qualified entity" Page 9, line 22: Delete "state agencies" and insert "other qualified entity" Page 10, line 11: Delete "state agency" and insert "other qualified entity Page 11, line 10: Following "1" insert "other qualified entity" means an intermunicipal or interstate agency as those terms are used in 33 US>C. 1383, and may include an authority, corporation, instrumentality, enterprise, or other entity formed through an agreement between a municipality and one or more other governmental entities under AS 29.35.010(13) or under art. X. sec. 13, Constitution of the state of Alaska, or between a municipality and a regional housing authority under AS 18.55.996(b); (2)" Page 11, lines 22 - 25: Delete "; (2) "state agency" means a department, authority, public corporation, instrumentality, or other administrative unit of the executive branch of state government" SENATOR TORGERSON , explaining the amendment, said the intent is to take out the references and definition of "state agency" and to insert "other qualified entity" and its definition in its place. A "state agency" is not an eligible entity because state agencies cannot dedicate funds to the repayment of their debt obligations. Senator Hoffman also requested municipalities and regional housing authorities be added so they could enter into joint agreements. MARIE SANSONE stated the department supports the amendment. Number 310 SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 4, and hearing none, he stated it was adopted. He also stated the four adopted amendments would be incorporated into a committee substitute. Number 315 SENATOR RANDY PHILLIPS moved that CSSB 207(CRA) and the accompanying fiscal notes be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 325 SB 229 STATE TRAINING & EMPLOYMENT PROGRAM  SENATOR TORGERSON brought SB 229 before the committee as the final order of business. He noted there were three proposed amendments before the committee for its consideration. SENATOR RANDY PHILLIPS moved adoption of the following Amendment No. 1: Amendment No. 1 Page 4, line 17: Delete "may" and insert "shall" Page 4, line 20: Delete "pilot project" Page 4, line 21: Delete "If" and insert "When" Page 5, line 5 - 6: Delete "a pilot project grant for a period of up to two years" and insert "grants" Page 5, line 7: Delete "an" Page 5, line 8: Delete "training entity" and insert "training entities. A training entity is eligible for a grant under this section" Page 5, line 16: Delete "pilot project" REBECCA NANCE , Director, Employment Security Division, Department of Labor, stated the department had no objection to the amendment. SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 1, and hearing none, he stated it was adopted. Number 352 SENATOR RANDY PHILLIPS moved the adoption of the following Amendment No. 2: Amendment No. 2 Page 5, line 1: After "." insert: "The department shall give preference to projects and services that train individuals in industries identified in the resident hire report required under AS 36.10.130 as employing a disproportionate percentage of nonresident individuals." SENATOR TORGERSON explained the amendment directs the department to put as a number one priority training people in Alaska to fill the positions that are held by nonresident workers. REBECCA NANCE stated the department wants to continue targeting local hire. Number 380 SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 2, and hearing none, he stated it was adopted. Number 385 SENATOR RANDY PHILLIPS moved adoption of the following Amendment No. 3: Amendment No. 3 Page 5, line 19: Delete "established for the council" REBECCA NANCE stated the amendment was recommended by the Department of Labor. SENATOR TORGERSON asked if there was objection to the adoption of Amendment No. 3, and hearing none, he stated it was adopted. He also stated the three amendments would be incorporated into a committee substitute, which brought the committee substitute before the committee. Number 400 SENATOR KELLY noted there were two different fiscal notes on the legislation, and he asked what the differences were. SENATOR TORGERSON responded that the original fiscal notes did not add up, so corrected fiscal notes were requested. SENATOR KELLY said we are talking about over $3 million being allocated for the program, but grants in 1994 totaled just a little over $1 million. He asked where the rest of the money is going. MARK MICKELSON , Division of Community & Rural Development, Department of Community & Regional Affairs, directed attention to a "flow chart" which he said would hopefully provide a picture of the method by which the STEP funds will flow within the state. He said a series of new graphs has been provided to the committee depicting how the 1995 funds were utilized at each of the SDA or the private industry council levels. The listing originally provided to the committee was a listing of the "larger grants" that were let as a result of the competitive RFP process. The balance of the true program funds, or grant funds that have gone on as depicted in the new chart, is spent on eligible clients and on eligible services. They are just done through a different process in terms of how it is recorded. SENATOR KELLY said it still doesn't show where the other $1.5 million is going. MR. MICKELSON said the funding is recorded, it is tracked. A summary report is provided to the Department of Labor every year identifying all the program activities. For example, if someone went to a classroom training program at AVTEC or the University of Alaska, etc., that has been recorded as an actual expenditure. However, they do not have the records of the hundreds of transactions of all those small vouchers. He said they are just providing the straight tuition and the normal costs to send somebody to one of those training programs. SENATOR RANDY PHILLIPS observed that even though they may not record it, they still must have some kind of accounting for those small voucher transactions. MR. MICKELSON agreed that was correct. He said for every individual who is served by this program, a file is maintained that contains the full application, certification that the information provided is true, eligibility verification, etc., so that information does exist. SENATOR KELLY commented there are a whole lot of individuals who are paying their own tuition and their own transportation, and yet, if some state employee graces you, then you get it for nothing. MR. MICKELSON responded they are trying to make the program accessible and available where people would normally go for assistance for employment, for unemployment insurance. He conceded they perhaps could do a better job at making the service better known to everyone. He also clarified that tuition at the University of Alaska is an allowable expense if it is compatible with someone's career goals. He added that they do not allow people to pursue long-term educational goals just for the sake of going to school. The program is focused on reattachment to the labor force. SENATOR KELLY asked if they would send any of their clients out of state for training. MR. MICKELSON answered that's generally not the case, but it would be possible if a very specialized training course or program was not available in the state of Alaska. However, the individual still must meet all the criteria. SENATOR KELLY asked if there is a parallel with the STEP program and the training provisions contained in the welfare reform legislation. SENATOR TORGERSON said he has discussed this with Mike Andrews of the Alaska Human Resource Investment Council and this does not parallel the welfare reform legislation, although the welfare reform creates another training program. The STEP program is driven by employee contributions so it's really not general fund money. TAPE 96-10, SIDE B Number 001 After brief discussion on how the employer/employee contributions are calculated, SENATOR TORGERSON invited Chris Miller to the table to explain the process. Number 060 CHRIS MILLER , Chief, Research Analysis Section, Department of Labor, explained that when they calculate the UI tax rate, the total contribution is separated at an 82 percent contribution from the employer and 18 percent from the employee. The tax rate is determined by multiplying the 82 percent times what they call their average benefit cost rate. The same thing is then done for the employee. He added it is possible that the employee tax will vary, but it varies only slightly over time. The last time the employee tax rate changed was in 1991 when it dropped to 0.5 percent. The 0.5 percent is on the wages earned up to the taxable wage base, which is currently at $24,400. To clarify the process, Mr. Miller said, as an example, for the current year the maximum an employee would pay, based on the taxable wage base of $24,400, would be $122, and the average an employer would pay, discounting the varying rates they have, would be $529 for a maximum. SENATOR KELLY asked, if he, as an employer, is paying 2.17 percent for domestic help, what's the highest rate somebody is paying and how much that employee is paying. MR. MILLER responded the highest rate is 5.4 percent for the employer and the employee is still at 0.5 percent. He also clarified for Senator Kelly that the employers at the 5.4 percent rate are penalty employers. These are employers who have not met various reporting requirements, or for other reasons they are paying a penalty rate. Number 215 SENATOR KELLY commented that the program is quickly becoming a funding mechanism, with DOL, DCRA and AHRIC getting parts of the pot. He asked if any of the numbers go through the budget process. ARBE WILLIAMS , Director, Administrative Services, Department of Labor, replied they do and they are listed in various places in the Department of Labor budget. SENATOR KELLY asked why they are asking for more money this year. MS. WILLIAMS said the difference between the total grant amount is what they estimate will be collected from one-tenth of employees' salaries. SENATOR KELLY wondered who is getting this money because he doesn't know anybody who his benefiting from this program. MARK MICKELSON related that the system is capable, in the future, of providing a lot of information on where individuals are being served, what they are enrolled in, etc., if that kind of information is desired. He added there are over 6,000 Alaskans who are very pleased this program has been in place. He has seen a lot of good things done with the program, and he believes they can provide the kind of accountability and information that would give assurance that this program is well designed in intention. Number 320 SENATOR TORGERSON asked about the possibility of finding a cap so that no more than a certain amount of money is taken out for administration. He said it is an employee giving money and it is funding other segments of government. MS. WILLIAMS spoke to reorganization efforts that are going on in the Employment Security Division, and she said they are well aware of the fact administratively, at all levels, that if they are not efficient, it costs their programs. Number 358 SENATOR TORGERSON stated he was going to hold SB 229, and he requested that the department provide more detail on where this money goes to balance the $3.6 million figure. He also believes it is a good idea to look at the possibility of a cap to limit the amount of overhead for the program. There being no further business to come before the committee, the meeting was adjourned at 2:55 p.m.